Cities should compensate small businesses affected by construction: report

A group representing small businesses in Canada is calling on municipalities to compensate those hit hard by the summer roadwork and construction season.

In a report released Wednesday, the Canadian Federation of Independent Business said it estimates that construction hurts the bottom line of a small business to the tune of about $100,000 on average, based on data from 5,500 companies.

“Business owners are often taking the brunt of construction, even if they support the project,” said Aaron Aerts, CFIB’s western economist. “Even those that weren’t impacted could see that they are next.”

Forty one per cent of businesses have been disrupted by local construction projects, the report suggested, mostly through traffic, dust, debris or noise levels, as well as customers having troubles finding parking or accessing storefronts.

Five per cent described the impact as “major.”

About seven per cent considered closing or relocating because of the impact of extended construction.

With 1.3 million private employers in Canada, the CFIB suggests 65,000 businesses – or one in five – are negatively affected by construction.

Cambie Street dig took four years

The Canada Line in Vancouver, which required digging up Cambie Street in the four-year project ahead of the 2010 Winter Olympics, cost the average business in the corridor just under $112,000 in sales, the report said.

Some business owners ended up closing their doors, while owner Susan Heyes sued the rapid transit line builders for $600,000 for compensation, though she was later stripped of the award when a higher court judge.

In Victoria, the replacement of the Johnston Bridge, approved in 2012, finished in March, but it was three years behind schedule, so business owners endured prolonged road closures and traffic congestion.

A light-rail public transit project in Surrey is set to take four years to build along major streets near the Guildford Town Centre shopping mall and a Simon Fraser University campus.

Call for cities to act

Business owners often have their backs against the construction fence, Aerts said, pointing to no insurance for interruption due to construction work and sometimes no proper notice from the municipality.

“When you think of a small business owner, working 70 hour weeks as is… For them to go to city hall to make a lot of noise – they will try to absorb the damage instead,” Aerts said. “That’s not really fair to them.”

In Canada, businesses can claim compensation for losses from public construction through the “injurious affection” policy. That requires a specific timeline to submit claims as well as extensive evidence often needing legal and engineering experts.

The CFIB is recommending municipalities develop a compensation program for cases where construction has a moderate to major extended impact.

“It could be targeted to those that are hit the hardest,” Aerts said. “Providing compensation to ensure they don’t have to shut down could benefit government revenues.”

Municipalities could also look at property tax relief, which is already underway in cities around the world, such as Seattle, which has created a US$15-million fund for businesses affected by the construction of a light-rail line.

Other key recommendations include a business liaison officer, as well as a “no surprise rule,” meaning governments track their infrastructure’s condition and let local businesses know of construction well in advance, through a five-year capital investment plan and relevant pre-construction consultations that benefit those businesses.

Municipalities should also improve their contracting process and include a bonus/penalty system for early or late completion of projects, the report said. This would include ensuring best practices by the contractor are also met, such as adequate signage and parking.

“For them, having something that municipalities are at least considering for them is important,” Aerts said.